Full Judgment Text
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CASE NO.:
Appeal (civil) 1520 of 2001
PETITIONER:
Nanya Imports & Exports Enterprises
RESPONDENT:
Commissioner of Customs, Chennai
DATE OF JUDGMENT: 10/04/2006
BENCH:
ASHOK BHAN & LOKESHWAR SINGH PANTA
JUDGMENT:
J U D G M E N T
Bhan, J.
The point involved in the present appeal is:-
Whether the expression "insoles, midsoles and
sheets thereof" used in the exemption Notification
No.20 of 1999 issued under the Customs Act, 1962
(for short "the Act") can be interpreted to mean
that the sheets rolled up for the convenience of
loading and transport, would disentitle the
assessee from the benefit of the Notification?
FACTS
Appellant is a partnership firm based in New
Delhi dealing in the business, inter alia, of
leather footwear materials and accessories. One of
the items regularly imported by the appellant is
"PU coated leather fabrics" which are extensively
used in the leather footwear industry as "insoles
and midsoles". This item was covered originally by
Notification No.224/85 and thereafter by the
successor Notification No.45/94. As on the date
this item figures under the description "insoles,
midsoles and sheets thereof" figuring in Sl. No.108
of List 3 (A) (3) in Notification No.20/99 which
replaced the earlier Notification. The same reads:
TABLE
S.
No.
Chapter
or
heading
No. or
sub-
heading
No.
Description of
Goods
Stand
ard
Rate
Addit
ional
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Duty
rate
Condi
-tion
No.
(1)
(2)
(3)
(4)
(5)
(6)
108
.
64 or
any
other
chapter
Xxx
The following
goods for use in
the leather
industry, namely:
(1) Parts,
consumables and
other items
specified in List
3(A)
(2) Other parts,
consumables and
items specified
in List 3(B)
xxxx
20%
20%
--
--
--
14
xxx
xxxx
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LIST 3(A) (Sec. S.No.108 of the Table)
PARTS, CONSUMABLES AND OTHER ITEMS
(1) Leather, plastic, rubber coco board, masonite
board or plastic board, heels with or without
rubber/PVC top lift (2) Toe caps and counters for
leather footwear (3) Insoles or midsoles and sheets
therefor (4) Welts made from leather or plastic (5)
shoes eyelets (6) Felt sleeves (7) Heel tips etc.
xxxx
Before proceeding further it is relevant to
mention that PU coated leather fabrics was the
subject matter of a contested adjudication
proceeding between the parties in 1995 in which the
appellant sought to clear a consignment claiming
the benefit of the Exemption Notification No.45/94.
A show cause notice was issued by the Customs
Authorities at Chennai claiming that the goods were
not classifiable as "insoles, midsoles and sheets
thereof"; the said goods had no use in the leather
industry and that the goods were capable of other
uses and hence the end use requirement was not
satisfied. The Commissioner of Customs, Chennai by
a considered order dated 28.2.1995 held that the
subject goods were indeed capable of use in leather
footwear industry as insole material. It was
further held that the capability of the goods for
being used in the footwear industry having been
proved, the Notification did not contemplate any
end use restriction. Consequently, goods were
accepted as "insole" and the benefit of
Notification No.45/94 was granted to it. This
order of the Commissioner of Customs was cited with
the approval by Eastern Bench of the Tribunal
reported in Mod Apparel Exports Vs. CC Calcutta,
1996 (14) RLT 174 (CEGAT). This order of the
Tribunal was upheld by the High Court of Calcutta
in C.A. No.1717 of 1995 - Tirupati Garments &
another Vs. Union of India & others dated
11.6.1996. Thereafter, the appellant have been
clearing several consignments of the same material
and the department had permitted the clearance
following the order of Commissioner which had
become final since no appeal, review or revision
had been preferred against it.
In February, 1996 another consignment imported
by the appellant and cleared by the Customs
Authorities at Chennai was seized by the New Delhi
Preventive Wing when the goods were being unloaded
at the appellant’s Karol Bagh godown. The said
seizure resulted in a fresh adjudication in Chennai
wherein the Commissioner passed an order holding
that the appellant had failed to establish actual
use in leather industry and consequently denied the
benefit of the Notification No.45/94. This order
was set aside and the case was remitted back for a
fresh decision. The appellant participated in the
fresh adjudication. After hearing the parties, the
judgment was reserved by the adjudicating authority
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but according to the appellant the decision is
still awaited.
Appellant received a consignment of PU coated
insoles sheets for leather fabrics at Chennai in
June, 1999. Revenue ("the respondent" herein)
denied the benefit of the Notification No.20/99.
Appellant waived show cause notice and the personal
hearing and placed submissions before the
adjudicating authority based on the earlier imports
by it and the order passed by the Commissioner
therein. The adjudicating authority held that
though the end use of the subject goods was
established, but denied the benefit of the
Notification No. 20/99 to the appellant on the
ground that the subject goods were not "sheets" but
"films" or "running sheets" and therefore, not
entitled to the exemption from customs duty. For
this adjudicating authority relied upon the
judgment of this Court in Collector of Customs,
Bombay Vs. M/s. K. Mohan and Company Exports, 1989
(2) SCC 337. Aggrieved by the above, the appellant
preferred an appeal before the Customs Excise and
Gold (Control) Appellate Tribunal, South Zone Bench
at Chennai (for short "the Tribunal") which was
numbered as C/457 of 1999 and that has been
dismissed by the impugned order dated 25.4.2000.
It has been held that the earlier decision of the
Commissioner at Chennai in the adjudication arising
in proceedings relating to the year 1995 was no
longer valid in view of the later judgment of this
Court in M/s. K. Mohan and Company Exports,
(supra). The contention raised by the counsel for
the appellant that the judgment in M/s. K. Mohan
and Company Exports (supra) was distinguishable was
rejected by observing that the finding recorded by
the apex Court in the said case in the context of
description of goods in the Notification were para
materia to the description available in the present
Notification under consideration. Adverting to the
finding recorded on the alternative submission of
the counsel for the assessee in the said case it
was observed:
"...In the Apex Court judgment
referred to, the term "sheets" and
"sheetings" has been dealt with and
the raw material was ’plastic films’
in rolled form and the Apex Court
after due consideration held that they
are to be considered as "sheetings"
and not ’cut to size’. It has been
held that sheets has to be understood
only with regard to the items which
have been cut to size and not those in
rolled form. In the present case
also, admittedly, appellants have
imported the material in length of 50
mtrs on the requirement of customers.
They are themselves carrying out the
activity of cutting to size before it
is sold to customers for the purpose
of manufacture of Insoles and
Midsoles. The term "sheets thereof"
should refer to the words ’which
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should have been cut to size’ for the
purpose of manufacture of Insoles and
Mid Soles. The words "thereof" has to
be read along with the terms "In-soles
and Mid soles". Where sheets has been
imported in cut form and being
utilized solely for the purpose of
manufacture of in-soles and Mid soles,
they go along with it in terms of the
entire reading of the terms of the
notification."
Learned counsel for the appellant strenuously
contended that the impugned goods had been imported
by the appellant in the form of "sheets" but for
loading convenience; the sheets, being 50 metres
long and the material being highly flexible, had
been rolled up for loading, which did not detract
from the facts that the goods were sheets in rolls.
The Notification merely required the goods to be in
the form of sheets in contradistinction to being
cut in shapes and forms. There is no distinction
between being in rolls or loose sheets. The
judgment of this court in M/s. K. Mohan and Company
Exports (supra) is distinguishable as in the said
case subject goods were film rolls and the Court
brought out the distinction between "films, foils
and sheets" as well as the contrast between
"sheets" and "sheetings". The said judgment has no
applicability to the present case which on the
other hand is directly covered by the judgment of
the Tribunal in the case of Plast Fabs Vs.
Collector of Customs, 1993 (66) ELT 441 wherein the
Tribunal specifically dealt with "PVC flocked
sheets in rolls". It was further contended that
the issue as to whether the subject goods imported
in rolls had already been the subject matter of
several judicial pronouncements, some of them
between the parties, were binding on the revenue as
the same had attained finality.
As against this the learned counsel for the
respondent contended that the judgment of this
court in M/s. K. Mohan and Company Exports (supra)
was fully applicable to the facts of the present
case and in view of this judgment which is later in
point the earlier judgments rendered by the
Tribunal or the Commissioner interpreting the
Notification in the present case are no longer good
law that the Tribunal has rightly ignored them in
view of the judgment of this Court. That the
goods imported by the appellant were not "sheets"
and were "sheetings" as has been held in M/s. K.
Mohan and Company Exports (supra).
Finding regarding the end use is not in
question. Finding recorded by the Commissioner
(Appeals) in favour of the assessee regarding the
end use was not challenged by the revenue before
the Tribunal and the same has attained finality.
The only point to be considered is, whether the
judgment in M/s. K. Mohan and Company Exports
(supra) is applicable to the facts of the present
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case or not. In the said case M/s. K. Mohan and
Company Exports was importing "metallised polyester
films" from Japan under an import licence. The
goods were admittedly in the shape of film rolls
several metres long. They were cleared on payment
of customs duty leviable under the Customs Act,
1962 (Customs Tariff) as well as the additional
duty of customs (or countervailing duty) leviable
under Section 3 of the Customs Tariff Act, 1976.
Subsequently, the assessee made three applications
for the refund of the amount of the additional duty
of customs paid by it. The claim for refund was
based on the terms of a Notification of exemption
issued under Section 25(1) of the Customs Act.
Under notification No. 228/76 dated 2.8.1976, an
exemption from the customs duty payable under
Section 3 of the Customs Tariff Act was granted in
respect of "articles made of plastics, all sorts,
but excluding those specified in the table annexed
thereto and falling within Chapter 39 of the First
Schedule to the Customs Tariff Act, 1975 (51 of
1975)". The annexed table excepted the following
items from the purview of the exemption:
"Tubes, rods, sheets, foils, sticks,
other rectangular or profile shapes,
whether laminated or not, and whether
rigid or flexible including tubings
and polyvinyl chloride sheets."
The case of the department was that the
goods were "sheets" or "foils" or "other
rectangular or profile shapes" and hence liable to
duty. On the other hand the assessee’s case was
that they were "films", a specie of plastic
articles different from any mentioned in the table
annexed. It was alternatively contended that, even
if they are treated as thin sheets of plastic
material, they can be more accurately described
only as "sheetings" and not "sheets". The
assessee’s claim for refund was accepted by the
Tribunal. It was held that the goods imported by
the assessee were articles made of plastic. The
subject goods were ’films’ and did not fall in any
of the excepted articles enumerated in the table
annexed to the Notification.
In the appeal this Court keeping in view that
the articles in question were recognized in the
trade as "films" rejected the contention of the
revenue that the same were either "foils" or
"sheets". Assessee’s contention was accepted. It
was observed that it was difficult to imagine any
person going to the market and asking for the films
by describing them either as ’foils’ or as
’sheets’. The alternative submission of the
learned counsel for the assessee in the said case
that a film of indefinite length and not in the
form of individual cut pieces can be more
appropriately described as "sheetings" rather than
"sheets" was accepted. It was observed that the
Indian Standard Institution also defines ’sheets’
as a piece of plastic ’sheeting’ produced as an
individual piece rather than in a continuous length
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or cut as an individual piece from a continuous
length.
Revenue’s contention that articles were
covered by the expression "other rectangular or
profile shapes" was also rejected by observing that
such articles had a distinct name in the market as
’films’ and therefore they are outside the table as
already pointed out. That it will not be possible
to accept the contention that the articles which
have a clear commercial identity as ’films’ should
be brought within the wide and vague expression
"other rectangular or profile shapes", because, if
the film is cut into small pieces, each piece will
be rectangular in shape.
It would be thus seen from the facts enumerated
above and the finding recorded by the Court that
the assessee had imported the goods in the form of
"films" and the trade also understood the articles
in question to be "films" and not "sheets" and
therefore, this Court primarily held that the goods
imported by the assesses were "films" and not
"sheets". Assessee in the present case is
importing "PU quoted insole sheets" in a rolled up
form for loading convenience. Even as per the ISI
specifications for "PVC coated fabrics for footwear
industry" requires the packing to be in the form of
rolls so as to ensure safe transportation. Clause
5.1 of Indian Standard Institution specification
for PVC coated fabrics for footwear industry
IS:8699-1977 provides:
"5.1 Packing \026 The material shall be
securely packed in the form of a roll
so as to ensure safe transportation."
Contention of the assessee that the goods had
been imported in the form of sheets being 50 metres
long were rolled up as specified by the ISI
standards for loading and safe transportation has
gone unrebutted. The burden was on the revenue to
prove that the subject goods were not "sheets" for
which no evidence whatsoever was led by the
revenue. The burden of proof as to whether the
item in question is taxable in the manner claimed
by the revenue is on the revenue. Mere assertion
in that regard is of no use. It has repeatedly
been held by this Court that it is for the
taxing authority to lay evidence in that
behalf. [See Union of India and Others Vs.
Garware Nylons Ltd. & Others, 1996 (10) SCC 413 \026
Para 15 and Hindustan Ferodo Ltd. Vs. Collector of
Central Excise, Bombay, 1997 (2) SCC 677 \026 Para 4).
The burden was on the revenue to prove that the
said goods were not "sheets" for which no evidence
whatsoever was led by the Tribunal. The goods,
imported in the form of the sheets but rolled up
for loading and transportation purposes, would not
convert them into ’films’ or ’sheetings’ thereby
denying the assessee the benefit of the exemption
Notification.
The judgment of M/s. K. Mohan and Company
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Exports (supra) was reverse case where the
assessee’s case was that the subject goods were
"metallised polyester films imported in the shape
of film rolls" entitling him to the exemption from
the customs duty. The revenue’s case was that the
subject goods were "sheets’ which was one of the
excepted goods mentioned in the table annexed to
the Notification and therefore, not entitled to the
exemption from duty. In the present case, the
situation is just the reverse. Assessee says that
it has imported "sheets" of running length in a
rolled up form for the sake of convenience for
loading and transportation purposes as per the ISI
specifications. Assessee sold the subject goods in
different lengths as per requirement of the
customer. The customer then used the same by
cutting them into different sizes (shape or size of
the shoes) as per the requirement to insert them
into shoes. In M/s. K. Mohan and Company Exports
(supra) this Court considered a different exemption
Notification set out in the context of different
facts, its import and meaning. In the context of
the present notification the distinction drawn by
this Court while accepting the alternative
submission of the learned counsel in M/s. K. Mohan
and Company Exports (supra) between "sheet" and
"sheeting" would not be attracted. To illustrate,
if the exemption is granted to the ’carpets’ and
the assessee imports the carpet in a running
length of 50 meters length in a rolled up form, and
then sells the same in pieces after cutting them
from the running length as per requirement of the
customer would not disentitle the assessee from
the benefit of the notification exempting duty on
carpets simply because the carpets were brought in
a rolled up form in a running length.
For the reasons stated above, we accept this
appeal, set aside the order of the Tribunal and
that of the authorities below with consequential
effects. No costs.